Time for a reality check on the medical device tax

08/19/2015

If you have been following the debate swirling around the medical device excise tax, as I have, you might have been startled by some recent headlines trumpeting that large medical device manufacturers have continued to see their profits increase, despite the 2.3% tax on the sale of certain medical devices. This is quite a contrast with what many in the medical device industry have pilloried as a job killer and stake in the heart of medical innovation. So, what gives?

The recent headlines came on the heels of a report published by the Government Accountability Office (GAO), which analyzed information on the net sales and profits of 102 medical device companies before and after implementation of the Affordable Care Act (ACA), aka Obamacare, based on their filings with the Securities and Exchange Commission (SEC). The study was requested by Senate Minority Leader Harry Reid (D-Nev), who is a supporter of the device tax.

The GAO found that net sales increased overall for the companies it examined from about $95 billion in 2005 to about $136 billion in 2014, which is in the neighborhood of a 43% increase over that period and an annual increase of about 4%. Net profits also increased overall from about $11.4 billion in 2005 to about $16.5 billion in 2014. Not too shabby.
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